US machinery businesses related to the oil/gas or the mining segments are affected by lower capital spending on purchasing machinery and equipment.

The US is the world's largest market for machines/engineering, as well as the third largest supplier. Domestic manufacturers’ share of the US domestic market amounts to nearly 60%.

Revenues of the engineering services industry rebounded in 2015 after some years of decrease, as greater liquidity in financial markets helped to boost spending on new construction. The US machines/engineering sector recorded a growth of 1.2% last year.

Construction-related machinery businesses are expected to benefit in 2016, as US construction starts are forecast to increase 6%. Infrastructure spending is also expected to expand. Quality engineering products will remain in very high demand throughout most industrial segments in 2016.

That said, machinery businesses related to the oil/gas or the mining segments are affected by lower capital spending on purchasing machinery and equipment.

In general the dependency on bank financing of this capital-intensive industry is high, and US banks are principally willing to provide loans to the sector. The average payment duration in the US machinery industry is 30 days, however, payment terms can be longer as capital equipment can carry a higher price tag. Payment experience over the last two years has been good, with a rather low number of non-payment cases, and it is expected that these latter will decrease further in the coming six months.

Compared to other US industries the rate of insolvencies is low in the machinery sector, and it is expected that business failures will decrease in H2 of 2016. Due to the benign credit risk, our underwriting stance for the US machinery sector is generally open. Some caution is advised on machinery subsectors dependent on the oil/gas and mining industry.